Companies across the UK and EU27 are suddenly realising there are now just 30 working days until the UK will likely abandon its 45-year trading relationship with the EU, and start to trade on WTO terms.

If this happens, every supply chain involving a movement between the UK and EU27 will change. And all those supply chains governed by EU deals outside the EU will also change. A large number of industries are already being impacted:

Scotch whisky exports to Korea worth £71m ($90m) a year, risk a 20% tariff after 29 March if the EU’s Free Trade Agreement is replaced by WTO rules. It is now too late to export by boat, causing some exporters to use expensive air freight to beat the deadline. But capacity is already almost full.

And last week, BASF’s UK MD, Richard Carter, told Ready for Brexit that for the world’s largest chemical company: “The thought of having to re-register with a UK REACH equivalent if there is no deal and if there is no recognition equivalence is a huge concern”.

THE UK REMAINS ON COURSE TO LEAVE THE EU WITH NO DEAL ON 29 MARCH
But surely, you say, “this cannot happen”. After all the UK’s main business organisation, the Confederation of British Industry, has already warned that No Deal would create “a situation of national emergency“.

But the leading Tory Brexiters don’t believe this. Their 111 votes, combined with the 10 votes from the Democratic Unionist Party, meant premier May’s Withdrawal Agreement was defeated by 230 votes last month. It would have provided a Transition Agreement until the end of 2020.

However, their votes then swung behind her to defeat the motion of No Confidence in the government, which would have led to a general election. Why did they do this, you might ask, given they had just voted against her key policy?

The answer is that the Brexiters have a completely different view of the Brexit negotiations, as I noted in The pH Report last year.

They simply don’t accept the CBI argument. Instead they believe the EU27 will be the main losers from No Deal as they argue the financial outcome will be:

“Plus £651 billion ($875bn) for the UK versus minus £507bn for the EU: it could not be more open and shut who least wants a breakdown.“

In their view, the best way to force the EU27 to offer a better deal is simply to leave on 29 March.

They also, as I noted here in December, will be quite happy to see the end of key industries such as autos, as the leading Brexiter economist Prof Patrick Minford told the Treasury Committee in October:

“You are going to have to run it down … in the same way we ran down the coal industry and steel industry. These things happen.”

The alternatives to No Deal are now also extremely limited. The Caroline Spelman/Jack Dromey resolution to block No Deal was passed last month by 8 votes. But it was only a resolution and has no legal force.

Of course, Parliament might change its mind and decide to vote for May’s Agreement. Or the government might revoke its Article 50 notification before the UK leaves on 29 March. But both would split the Tory and Labour Parties and are unlikely to happen.

The government could also decide to hold a second referendum. But again, this would split both parties and is unlikely.

It is therefore hard to disagree with the independent Institute for Government, who concluded: “Britain’s politicians are unwilling to put jobs and the economy above party politics.”

The only other option is for MPs to effectively take over the government by demanding that it stops No Deal. It is not clear how this could happen, but presumably they could pass legislation demanding that May asks Brussels for a lengthy extension to Article 50.

But such a move by Parliament has never happened before. It would need key Ministers such as Chancellor Philip Hammond to vote against their own government. It would also need support from enough Opposition MPs to overcome Brexiter resistance.

It would also risk a constitutional crisis, as it would replace an elected government. And in terms of practicalities, it would presumably also mean that the UK would take part in the EU Parliament elections, as it would still be a full EU member in May. The whole process would take the UK into completely uncharted water.

THERE ARE JUST 30 WORKING DAYS LEFT TO PREPARE FOR A NO DEAL BREXIT

Anticipating this risk led me to co-found Ready for Brexit last year, to help businesses navigate the challenges and opportunities created by Brexit.

It is effectively the one-stop shop requested recently by the CBI. It provides curated links to all the areas where you may need to urgently prepare for Brexit.

The video explains what WTO rules could mean for your business. Please watch it now, and then decide if you need to start planning today for whatever may happen on 29 March.

The Financial Times has kindly printed my letter below, arguing that it seems the default answer to almost any economic question has now become “more stimulus” from the central bank.

After 15 years of subprime lending and then quantitative easing, last week’s warning from the Bank of England suggests there are fewer and fewer economic questions to which the default answer is not “more stimulus”.

But it is still disappointing to find the Financial Times supporting this reflex reaction when considering the risks associated with Brexit next month (“Bank of England must grapple with the risks of a no-deal Brexit”, February 6). Nobody would dispute that the bank has a critical role in terms of ensuring financial stability through the Brexit transition. As the FT says, the “potential outcomes are discrete and the impacts vary widely”.

But the bank has already fulfilled this role by publishing its November assessment of the no-deal risks for government and parliament to consider. There is therefore no justification for the bank to pre-emptively impose its views by deciding to keeping interest rates artificially low.

The political risks associated with such an intervention would be large, particularly if the bank’s assessment or its proposed solution proves wrong. And there is also the risk of unintended consequences.

The history of stimulus does, after all, suggest that the only certain outcome of lower interest rates would be a further rise in today’s already sky-high level of asset prices.

“That couldn’t happen” are probably the 3 most dangerous words in the English language. They mean “I don’t want to think about something that might be painful“. So if you hear MPs saying a “No Deal Brexit can’t happen“, ignore them. They are wrong.

‘NO DEAL’ BREXIT IS THE LAW OF THE LAND
The issue is simple, yet seemingly too painful for most MPs and commentators to accept.

The law is the law, and the Act is primary legislation, which means it has since been incorporated in a whole range of laws and regulations as part of the UK’s exit preparations. It cannot, therefore, be overturned by statements that claim “There is no majority for No Deal”.

In fact, during the Committee stage, the House of Commons voted 320-114 in Committee Stage against staying in the Customs Union. It also voted 319-23 against a second referendum. And last week, MPs voted 432-202 against the proposed Withdrawal Agreement.

So if MPs say “No Deal can’t happen”, they are wrong. They have already voted for ‘No Deal’.

CHANGING PRIMARY LEGISLATION IS VERY HARD

Of course, MPs could still change their minds. But there are now less than 70 days till Brexit. And they would also have to agree this with the other EU 27 countries. These represent nearly 450 million people versus the UK’s 66 million.

Equally important is that the UK has been heading in this direction since negotiations started:

Negotiating a Canada/Singapore-style Free Trade Agreement would likely take years (I’ve done these in the past), so No Deal is also the default position while this takes place

This position was later summarised in the above EU slide, and nobody has since disagreed with it

Since then, MPs have voted for the Withdrawal Act; against remaining in a Customs Union; against a new referendum; and against the Withdrawal Agreement. They have also voted for invoking Article 50 and for setting 29 March 2019 (by 498-114 votes) as Brexit Day.

So time is running out for them to change their minds.

THE ALTERNATIVES TO ‘NO DEAL’ ARE CURRENTLY WISHFUL THINKING

The politics of Brexit also make it unlikely that the government will change its mind, or be forced to change its mind:

Theresa May knows very well that any move to “soften” Brexit by joining a Customs Union would split her Conservative Party down the middle. And any Tory MP who voted for a softer Brexit knows they would likely be deselected as a candidate and lose their job

Labour leader Jeremy Corbyn voted to leave the EU in the 1975 referendum, and against the Maastricht/Lisbon Treaties. Many traditional Labour voters are also strongly pro-Leave. So any Labour MP voting against the Party line also faces the risk of deselection

It is therefore hard to see why simply extending Article 50 beyond 29 March would change anything.

And extending would enormously complicate the European elections in May. At the moment, the UK is not taking part in these, as it is leaving on 29 March. But if it isn’t leaving after all, there is little time left to prepare to vote on 23 May

Of course, the EU27 might agree an extension if the UK decided to hold a second referendum, as long as the vote was held before the new Parliament starts work on 2 July. But they would likely first want to know the question on the ballot paper.

Would the government ask if the voters approved of May’s Withdrawal Agreement? Would it instead ask if they wanted to stay in the EU? Or would it simply ask if they wanted to leave with No Deal?

Any of these questions are possible. But deciding between them could be very divisive in itself. And a referendum campaign could be even more divisive. Plus, its outcome would be very uncertain if voters worried that democracy was being undermined by a refusal to accept the first result.

But this would only be the start of a quite complex process, which might well end with a General Election being called – and all the while, the clock is ticking.

So after the government’s defeat on Tuesday, UK businesses and those that trade with the UK must urgently begin to plan on the basis that a No Deal Brexit on 29 March is now UK law.

Please consider joining Ready for Brexit today (the advisory service I co-founded in June). It is effectively the one-stop shop requested by the CBI, and provides curated links to all the areas where businesses may need to prepare for Brexit.

The Brexit debate had appeared to be a simple game of Snakes & Ladders till now. The Leave campaign landed on the ladders that led to its goal of No Deal, whilst the throw of the dice left Remain on the snakes, tumbling down towards irrelevance.

Yet today, at the very last minute, there are signs that we might instead now be starting to play the far more complex English game of cricket where captaincy is all-important, as one famous Australian cricketer has remarked:

“Captaincy is 90% luck and 10% skill. But don’t try it without that 10%”.

The Brexiters should certainly have won by now, if we were playing Snakes & Ladders. They landed on a ladder early in the game when premier May set 29 March 2019 as Brexit Day. By default, this meant the UK would then leave the EU without a deal – unless a Withdrawal and Transition Agreement could be finalised before then.

No Deal is, of course, the Brexiter dream as the leading Brexit economist, Prof Patrick Minford, argued in May when suggesting its result would be:

“Plus £651 billion ($875bn) for the UK versus minus £507bn for the EU: it could not be more open and shut who least wants a breakdown.“

“Even if May can somehow achieve a deal with the DUP (the Democratic Unionists on whom she depends for her Commons majority), she would still have to agree it with the Leave enthusiasts in the Conservative Party. They are convinced that the real cost of Brexit will be borne by the EU27….

It therefore seems unlikely May can find a deal that is acceptable to the Leavers, given their belief that a “hard Brexit” represents the best negotiating strategy for the UK.”

Today, it is clear that the DUP and the Tory Leavers will indeed vote against May’s Deal next week.

So by now, the Leavers should be celebrating. But they aren’t. Somehow leading Leavers such as Boris Johnson, David Davis and Dominic Raab all managed to land on their own personal snakes by resigning from the Cabinet at critical moments.

THE LEAVERS HAVE FAILED TO PRESS HOME THEIR ADVANTAGE

In life, as in cricket, one has to seize the advantage when it comes your way. This is where the 10% of skill is all important, as it tells you when to grasp the moment. Clearly Leave, led by the former Foreign Secretary Boris Johnson, has so far failed to hit the all important ball to the boundary and secure victory.

In cricketing terms, Remain may therefore have just managed to avoid an innings defeat, giving them the chance to go into bat again. Skillful captaincy will then be all-important. The next few weeks will therefore be the most critical period for the UK economy in recent history as competing visions of the future battle it out:

Prof Minford told the UK Treasury Committee in October that the UK auto industry needs to disappear: “You are going to have to run it down … in the same way we ran down the coal industry and steel industry. These things happen.”

Yet it is not clear that UK’s industrial heartlands who gave Leave its majority share this vision. They, after all, were told at the time that Brexit would simply mean giving the National Health Service “the £350m the EU takes every week“

3 Scenarios therefore seem possible over the next few weeks.

SCENARIO 1 – MAY LOSES NEXT WEEK’S VOTE, AND LOSES A NEW VOTE IN JANUARY
A week is a long time in politics, but it seems relatively safe to say that May is unlikely to win next week’s Commons vote on her Withdrawal Agreement. Her aides, however, have been busy playing up the likely size of her defeat, suggesting she could lose by 100+ votes. And so, politics being politics, they will likely spin this as a success if she now loses by “only” 50 votes.

In turn, this would probably enable her to defeat a motion of No Confidence, and then bring a slightly modified version of the Agreement back for a new vote in January. At that stage, it would be too late for any new deal to be agreed with the EU27. So if she then loses this second vote, the Brexiters will win by default. No Deal would become almost inevitable on 29 March.

SCENARIO 2 – MAY WINS A NEW VOTE IN JANUARY
UK politics is tribal, as I have been told many times over the past 2 years by leading MPs from all parties. As such, it is very, very difficult for a Tory MP to vote to bring down their government. So if May does “only” lose by less than 50 votes next week, then it is also possible that the Christmas break would provide time for reflection and give her a small majority in a second vote.

This, of course, would still mean the UK exiting the EU on 29 March. But in cricketing terms, it would essentially be a draw – where neither side could claim victory, due to the Irish “backstop” (originally a cricket term). In today’s Brexit version, it means that the UK would be bound to the EU unless and until the 27 agreed that the nightmare of a hard Irish border had disappeared.

SCENARIO 3 – MAY LOSES THE VOTE(S) BY A LARGE MARGIN AND THERE IS A NEW REFERENDUM

Scenario 1 is clearly the most likely outcome. But the current row over the legal advice being given to the government gives Remain the chance to build a solid opening stand in the battle for a new People’s Vote.

It is a complex legal area, as the timeline from the House of Commons Library confirms, which is why skilful tactics by the Remain captain, Sir Keir Starmer, will continue to be critical:

By resisting this move, May risks alienating the moderate Tory MPs that she needs for her survival

If they vote against her on the issue of Parliamentary privilege, they might feel emboldened to do so again

But this would still represent an extraordinary development as it has only happened twice before in recent history

After premier Eden was forced to resign after the humiliation of the Suez crisis in 1956

After the disastrous Norwegian campaign in May 1940, when Churchill replaced Chamberlain

In the background, however, is the key fact that an overwhelming majority of MPs voted to Remain. It is therefore not impossible that they could force a new referendum – particularly as the first was only “advisory”. Remain would then have to campaign positively on the issue of peace and prosperity – as I argued here in May 2016.

But then, at least, the British people would have a real chance to decide on the future they wanted for themselves and their children.

“The UK is now facing a national crisis”, according to Margaret Thatcher’s former Defence Secretary, Michael Portillo, speaking to a dinner in London on Thursday night. Brexit continues to tear the UK apart, and places the economy at greater and greater risk.

On Thursday, premier Theresa May had unveiled her draft Withdrawal Agreement with the EU27. Within a few hours, another 5 Ministers had resigned including her Brexit Secretary. Over the summer, she had already lost her previous Brexit Secretary and her Foreign Secretary, plus other Ministers. And 5 Ministers – including Michael Gove and Trade Secretary Liam Fox – are now planning to produce their own revised deal on the Irish question, in opposition to the draft agreement

Businesses are far too complacent about the risks of a No Deal Brexit, as I told BBC News on Thursday:

“If the deal went through Parliament, then we could be reassured that we had until the end of 2020 before anything happened. But looking at what’s happened this morning, it seems less likely that’s going to happen, and therefore the default position is that we leave without a deal on 29 March. And that, I think, panics SMEs, small businesses, because if you don’t know what’s happening that’s worse than almost anything else. “

If you, or a colleague, now need to get up to speed with Brexit developments – and what they may mean for your business and your investments, here is my ‘A – Z Guide to the Brexit Negotiations’:

Article 50 of the Lisbon Treaty sets out the rules for leaving the European Union. As with most negotiations, it assumed the leaving country would present its proposals for the post-withdrawal period – which would then be finalised with the other members. But the UK Cabinet was split on the key issues, and so the 2 year’s notice was given on 29 March 2017 without any firm proposals being made for the future UK-EU27 relationship beyond 7 “negotiating principles and “the desire for a “close partnership”.

“Brexit means Brexit“, has been the UK’s core statement since Article 50 was tabled. But as I noted back in September 2016, Brexit can actually mean a variety of different outcomes – and they have very different implications as the chart shows. At one extreme, the ‘Norway model’ is very similar to full EU membership, but with no say on EU decisions. Whereas the ‘Canada model’ is simply a free trade agreement offering some access to the Single Market (qv) for goods, but less access for services (which are 80% of the UK economy). A ‘No Deal Brexit’ (qv) means working under WTO rules with arbitrary tariffs and regulations.

The European Commission manages the day-to-day business of the European Union (qv) on behalf of the European Council, and is effectively its civil service. Its president is Jean-Claude Juncker and he appointed Michel Barnier to lead the Brexit negotiations. Barnier’s first step, as mandated by the Council, was to agree within the EU 27 “the overall positions and principles that the EU will pursue“. He understood that in any negotiation, the team that writes the drafts and controls the timescale usually has the upper hand. The UK’s failure to finalise its own detailed objectives before tabling Article 50 meant it gave up this critical advantage.

The Default date for Brexit is 29 March 2019. It has also been agreed that if a Withdrawal Agreement (qv) is finalised, then a Transition Agreement (qv) could operate until 31 December 2020. Unfortunately, many people have therefore assumed they can wait until 2020 before starting to plan for Brexit. But as the Commission warned in its ‘Guidelines for Brexit Negotiations on 29 April 2017, “nothing is agreed until everything is agreed“. So No Deal also means no Transition Agreement.

The European Union is a treaty-based organisation of 28 countries. As its website notes, it was “set up with the aim of ending the frequent and bloody wars between neighbours, which culminated in the Second World War“. The UK joined the original 6 members (Belgium, France, Germany, Italy, Luxembourg and the Netherlands) in 1973, along with Ireland (qv) and Denmark. Further expansions took place, especially after the end of the Cold War between the West and Russia. At the suggestion of then UK premier Margaret Thatcher, it was agreed to establish a Single Market (qv) and Customs Union based on 4 key freedoms – free movement of goods, services, people and money – and this transformed trading relationships across the continent.

The Financial Settlementor ‘divorce bill’ covers the costs of the programmes that the UK agreed to support during the period of its EU membership. Like most organisations, the EU operates on a pay-as-you-go basis and only charges member countries as and when bills actually come due. The UK calculates this to be between £36bn – £39bn (€40bn – €44bn), depending on the assumptions used.

The Labour Party want a General Election if the government fails to get Parliament’s approval for its proposed Withdrawal Agreement. But there is considerable uncertainty about what might happen next, if Labour won the election. Some suggest Labour could renegotiate the deal, others that there could be a second referendum. Either option would mean a new government asking the EU to ‘stop the clock’ on Article 50. As a result, support is rising for the idea of a ‘People’s Vote’, or second referendum, as this might be more able to achieve all-party support. The European Parliament elections in May also complicate the picture as a referendum would apparently take 22 weeks to organise.

A Hostile No-Deal would be the worst of all possible outcomes. But Theresa May has warned Parliament that “without a deal the position changes” on the £39bn Financial Settlement, contradicting her Chancellor, Philip Hammond. We do not know what would happen if the UK refused to pay, but one fears it could lead to a Hostile No-Deal if the EU then reacted very negatively in terms of future co-operation.

Ireland has proved to be a key sticking-point in the negotiations, as nobody wants to disturb the peace created by the Good Friday Agreement in 1998. The issue is the potential need to reintroduce a border between Ireland and the North to secure the Single Market. The draft Withdrawal Agreement devotes a full section to this issue, which remains a potential deal-breaker due to Brexiter concerns about N Ireland remaining in the Single Market and the UK remaining in the Customs Union. This expert Explainer from the impartial Institute for Government highlights the key issues.

June 2016 was the date of the referendum that voted to take the UK out of the EU.

Keeping the UK in “a single customs territory” with the EU after Brexit is a key feature of the so-called “temporary backstop arrangement” designed to avoid a hard border with Ireland. It is intended to operate until a full free trade agreement is finalised between the UK and EU. It was the most difficult part of the negotiations, and has provoked the most resistance from Brexiters.

Legal issuesare, of course, a critical area in the negotiations as the UK currently operates under the jurisdiction of the European Court of Justice (ECJ), and the UK wants to “take back control” to its own courts. However, the Withdrawal Agreement confirms that the ECJ will have a continuing role under the Transition Agreement and potentially afterwards if the “backstop” is activated.

Tariffs on Materials and goods would be introduced between the UK and EU27 if there is a No-Deal Brexit. Less well understood is that the UK’s trading terms would also change with countries outside the EU27, as the UK currently operates under more than 750 free trade and trade-related agreements negotiated by the EU – and it is unlikely that the UK could continue to benefit from them.

No Deal means that the UK would have to operate under WTO rules after 29 March. This short Ready for Brexit video explains the complications this would create. The WTO has also warned that the number of Technical Barriers to Trade “has grown significantly” in recent years, and these can often severely restrict trading opportunities. And EU laws would still have a role under WTO rules for all UK products sold into the EU27 under No Deal. The EU Preparedness Notices, for example, also suggest there could be a ban on UK banks providing financial services as well as a whole host of other restrictions including on travel.

Preparing for Brexit. My colleagues and I have set up Ready for Brexit. This is a subscription-based ‘one-stop shop’ and provides a curated Directory to the key areas associated with Brexit – Customs & Tariffs, Finance, Legal, Services & Employment, Supply Chain. It includes Brexit Checklists; a BrexSure self-audit tool to highlight key risks; a Brexit Negotiation Update section linking to all the key official UK and EU websites; Brexplainer video on WTO Rules; plus news & interviews with companies about their preparations for Brexit.

Regulations can often be a much greater barrier to trade than tariffs, as they set out the rules that apply when products and services are sold in an individual country. The EU never aimed to harmonise regulations across its member countries, as that would be an impossible task. Instead it has focused on creating a Single Market via mutual recognition of each other’s standards, along with harmonised rules on cross-border areas such as safety, health and the environment. Regulations are particularly important in the financial services industry, and many businesses are now relocating relevant parts of their operations into the EU27 so they can remain authorised to trade.

The Single Marketseeks to guarantee the free movement of goods, services, people and money across the EU without any internal borders or other regulatory obstacles. It includes a Customs Union, as this short BBC video explains, which seeks to ensure that there are no Customs checks or charges when goods move across individual country borders. With a No-Deal Brexit, however, the UK will become a Third Country and no longer benefit from these arrangements.

The Transition Agreement covers the period after 29 March, and would allow the UK to operate as if it were still in the EU until 31 December 2020. The aim is to give negotiators more time to agree how future EU-UK trade in goods and services will operate, and provide guidance for businesses on how the new deal(s) will operate. But 21 months isn’t very long, as trade deals are very hard to do and generally take 5 – 7 years. The problem is that they create Winners and Losers whenever a market (large or small) is opened up to new foreign competition – and the incumbents usually complain. The Transition Agreement will only operate if there is a Withdrawal Agreement and so would not happen with a No-Deal Brexit.

Unblocked, or frictionless trade, is a key aim of the negotiators. Nobody really wants to go back to the pre-1993 world, before the Single Market arrived, when vast numbers of forms had to be filled in and lorries/ships sometimes stopped for hours for border checks. As Honda explained in the summer (see chart) it could easily take between 2 – 9 days to move goods between the EU27 and UK without a Customs Union, compared to between 5 – 24 hours today. The cost in terms of time and money would be enormous given that, as Eurotunnel told the Commons Treasury Committee in June, “Over the past 20 years, warehouses have become trucks rolling on the road“.

Zig-zag perhaps best describes the process that has led us to this point. It began long ago when Margaret Thatcher resigned in 1990, as the catalyst was her position over European monetary union. Her supporters ignored the key fact that the party needed a new leader if it was to have a chance of winning the next election, and instead blamed Europe for their loss – soon styling themselves as Eurosceptics in her honour. Fast forward through many zigs and zags and as I warned in March 2016, – “Slowly and surely, a Brexit win is becoming more likely“. We can doubtless expect many more in coming months and years.

I well remember the questions a year ago, after I published my annual Budget Outlook, ‘Budgeting for the Great Unknown in 2018 – 2020‘. Many readers found it difficult to believe that global interest rates could rise significantly, or that China’s economy would slow and that protectionism would rise under the influence of Populist politicians.

MY ANNUAL BUDGET OUTLOOK WILL BE PUBLISHED NEXT WEEK
Next week, I will publish my annual Budget Outlook, covering the 2019-2021 period. The aim, as always, will be to challenge conventional wisdom when this seems to be heading in the wrong direction.

Before publishing the new Outlook each year, I always like to review my previous forecast. Past performance may not be a perfect guide to the future, but it is the best we have:

THE 2017 OUTLOOK WARNED OF 4 KEY RISKS
My argument last year was essentially that confidence had given way to complacency, and in some cases to arrogance, when it came to planning for the future. “What could possibly go wrong?” seemed to be the prevailing mantra. I therefore suggested that, on the contrary, we were moving into a Great Unknown and highlighted 4 key risks:

Rising interest rates would start to spark a debt crisis

China would slow as President Xi moved to tackle the lending bubble

Protectionism was on the rise around the world

Populist appeal was increasing as people lost faith in the elites

A year later, these are now well on the way to becoming consensus views.

Debt crises have erupted around the world in G20 countries such as Turkey and Argentina, and are “bubbling under” in a large number of other major economies such as China, Italy, Japan, UK and USA. Nobody knows how all the debt created over the past 10 years can be repaid. But the IMF reported earlier this year that total world debt has now reached $164tn – more than twice the size of global GDP

China’s economy in Q3 saw its slowest level of GDP growth since Q1 2009 with shadow bank lending down by $557bn in the year to September versus 2017. Within China, the property bubble has begun to burst, with new home loans in Shanghai down 77% in H1. And this was before the trade war has really begun, so further slowdown seems inevitable

Protectionism is on the rise in countries such as the USA, where it would would have seemed impossible only a few years ago. Nobody even mentions the Doha trade round any more, and President Trump’s trade deal with Canada and Mexico specifically targets so-called ‘non-market economies’ such as China, with the threat of losing access to US markets if they do deals with China

Brexit is worth a separate heading, as it marks the area where consensus thinking has reversed most dramatically over the past year, just as I had forecast in the Outlook:

“At the moment, most companies and investors seem to be ignoring these developments, assuming that in the end, sense will prevail. But what if they are wrong? It seems highly likely, for example, that the UK will end up with a “hard Brexit” in March 2019 with no EU trade deal and no transition period to enable businesses to adjust.

“Today’s Populist politicians don’t seem to care about these risks. For them, the allure of arguing for “no deal”, if they can’t get exactly what they want, is very powerful. So it would seem sensible for executives to spend time understanding exactly how their business might be impacted if today’s global supply chains came to an end.”

Populism is starting to dominate the agenda in an increasing number of countries. A year ago, many assumed that “wiser heads” would restrain President Trump’s Populist agenda, but instead he has surrounded himself with like-minded advisers; Italy now has a Populist government; Germany’s Alternativ für Deutschland made major gains in last year’s election, and in Bavaria last week.

The last 10 years have proved that stimulus programmes cannot substitute for a lack of babies. They generate debt mountains instead of sustainable demand, and so make the problems worse, not better. As a result, voters start to listen to Populists, who offer seemingly simple solutions to the problems which have been ignored by the elites.

Next week, I will look at what may happen in the 2019 – 2021 period, as we enter the endgame for the policy failures of the past decade.